Global Firms Shrug Off Volatility to Deliver Record Dividends

The latest Janus Henderson Global Dividend Index shows companies paid out a record $263.3 billion in dividends in the first three months of 2019

Holly Black 20 May, 2019 | 8:00AM
Facebook Twitter LinkedIn

Investors received a record $263.3 billion in dividends in the first three months of the year, as companies shrugged off stock market volatility. 

The latest Janus Henderson Global Dividend Index shows that first-quarter pay outs were up 7.5% from a year ago, helped by a number of special dividends. It estimates that a record $1.43 trillion will be paid out to investors this year. 

Pay outs in the first quarter were largely led by U.S. companies, where dividends totalled $122.5 billion – up 9.6% from a year ago. Dividends in the region accounted for 57% of pay outs in the quarter, although this is largely a quirk of seasonality: most U.S. firms pay dividends quarterly, but elsewhere in the world payments are made just once or twice a year. 

Ben Lofthouse, head of global equity income at Janus Henderson, said: “This is one of the major benefits for income investors – a diversified portfolio of equities provides a stable flow of dividends that will grow over the long term, even when earnings and financial markets are experiencing some volatility.” 

Indeed, the dividend policies of companies across the globe seem to have been largely unaffected by stock market volatility at the end of last year. Janus Henderson said around nine in ten US firms had increased their dividend, with the largest increases coming from the banking sector. A strong economy and favourable tax cuts have helped boost pay outs in the region. 

The US reached an all-time record for Q1 dividend payments along with eight other countries, including Canada. In the UK, a large special dividend from BHP Group (BHP) helped drive a 10.5% overall increase in pay-outs. 

Dividend growth in the UK has lagged other regions because pay outs are reliant on just a handful of sectors such as oil and mining, which tend to be very cyclical. Research by Link Asset Services found that 25% of all UK dividend payments between April and July 2018 came from just three stocks – HSBC (HSBA), Royal Dutch Shell (RDSA) and Rio Tinto (RIO) – and the top 15 payers accounted for 50% of all dividends.

 dividends by region

 

In sector terms, pharmaceuticals were the biggest-payers in the first quarter of 2019, according to Janus Henderson, contributing $1 in every $8 paid out across the globe and a total of $30.1bn. Swiss pharma giant Novartis accounted for $1 in every $30 paid out over the period – it has been the biggest first-quarter dividend payer in the world in six of the past seven years.  BHP Group, Roche, Royal Dutch Shell and AT&T made up the rest of the top-five payers in the first three months of 2019. 

Overall, the Global Dividend Index climbed to a record level of 190.1 indicating that dividends are now at almost twice the level than when the index was launched at the end of 2009. Japan has seen some of the fastest dividend growth over that period as structural changes in the region have encouraged businesses to reward their shareholders. Dividends have grown 70% since 2014 alone, compared to growth of 25% across the rest of the world over that period. In the first quarter of the year, pay-outs climbed 8.7% in Japan. 

Japan dividends

While the year has got off to a strong start, there is a chance that forecasts may be revised down as companies react to slowing growth and stock market volatility. Lofthouse explains: “Dividends are a lagging indicator of company health, so a reduction in their rate of increase is a normal consequence of slower earnings growth.” However, he adds that Janus Henderson is not changing its forecasts for 2019 at the moment, and is anticipating overall dividend growth of 5.2% for the year.

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BHP Group Ltd ADR68.70 USD2.04Rating
HSBC Holdings PLC500.10 GBX1.91Rating
Rio Tinto PLC5,524.00 GBX1.38Rating
Royal Dutch Shell PLC Class A2,352.50 GBX0.68Rating

About Author

Holly Black  is Senior Editor, Morningstar.co.uk